PGGM follows Redwood into China with €95m commitment

The Dutch pension fund service provider has become a cornerstone investor in the Redwood China Logistics Fund, an investment club intended for buying distribution, logistics and light industrial real estate in China’s growth markets.

PGGM, one of the Netherlands largest pension fund service providers with €121 billion of assets under management, has committed €95 million of equity to the first closing of a Chinese logistics club sponsored by Asia focused The Redwood Group.

Redwood, which was established in 2006 by former AMB Properties and ProLogis executives Charles de Portes and Stuart Gibson, has an initial capital raising target of RMB2.5 billion (€312.5 million; $393.5 million) for the Redwood China Logistics Fund through which the firm intends to invest in distribution, logistics and light industrial real estate in China’s growth markets.

The firm said in an announcement on the capital closing that the fund’s investments would be driven primarily by customer demand and by a need for modern and efficient facilities from logistics operators, retailers, light manufacturers and automotive companies. Redwood pointed to research by property services firm Jones Lang LaSalle which said the Chinese logistics market is currently under supplied and is expected to grow by eight to nine times in size during the next ten years.

The ten-year club, which is slated to close to investors by the end of 2012, is expected to be invested in between 12 to 24 properties in transactions valued at between $25 million and $50 million each.

Redwood president Charles de Portes and chief executive officer Stuart Gibson said: “China, the fastest growing and most dynamic economy globally, is experiencing an under-supply of efficient, high quality distribution facilities to keep pace with the tremendous and growing demand. Improving the efficiency and quality of such air, sea, land and rail cargo distribution facilities will contribute directly to improving the supply chain and global competitiveness of logistics in the country.”

As one of the club’s largest investors, PGGM will have a seat on its investment committee. Such sharing of decision-making powers has been a growing requirement for the world’s largest investors. Only yesterday, PERE reported how another Dutch investor, APG Group, had backed Indian developer Godrej Properties in a club venture with a similar share of leadership.

Guido Verhoef, PGGM’s head of private real estate, and Thijs Schoenaker, the pension fund servicer’s senior investment manager, jointly said in the announcement: “The ‘develop to hold’ strategy provides us with exposure to a high quality portfolio of income generating assets. The logistics property investments are expected to benefit from strong economic growth, urbanisation and consumption growth in China. We observe a strong need among companies to set up the supply chain in China.”